Buying a house is an exciting milestone in life. However, having less-than-perfect credit can make it more difficult to get approved for a mortgage. If you’re wondering “can I buy a house with a 604 credit score?” the answer is yes, but you’ll face some challenges.
What Is a 604 Credit Score?
Credit scores range from 300 to 850. A score of 604 falls in the fair credit range which is between 580 and 669. This means your credit is below average and could use some improvement before applying for a mortgage.
A 604 credit score indicates you may have had some late payments, defaults, or other negative marks on your credit history. While not terrible, lenders see applicants with scores in this range as higher risk compared to those with good or excellent credit.
How a 604 Credit Score Affects Getting a Mortgage
When you apply for a mortgage lenders check your credit score to help assess your overall credit risk. The higher your score the more likely you are to be approved and the better mortgage terms you can qualify for.
With a 604 credit score, you’ll face challenges like:
-
Higher interest rates – Lenders will charge you a higher rate to offset the increased risk of lending to you. Even a small difference of 0.5% can cost tens of thousands in extra interest over the life of the loan.
-
Fewer loan options – You may not qualify for conventional loans that require a 620 credit score minimum. But FHA loans only need 500+ credit.
-
Potentially larger down payment – Lenders may require 10-20% or more down with lower scores versus 3-5% for those with 700+ credit.
-
Harder to get approved – Lenders will scrutinize your entire application more closely before approving a mortgage with a 604 score. Steady income and low debt are key.
While buying a house with a 604 credit score is possible, improving your credit before applying will open up better mortgage opportunities.
Loan Types to Consider with a 604 Credit Score
Just because your credit isn’t perfect doesn’t mean homeownership is out of reach. Here are some mortgage programs that may work for borrowers with credit scores around 604.
FHA Loans
FHA loans are popular for borrowers with lower credit scores. The minimum FHA credit score requirement is just 500, well below a 604 score. Down payments are low at just 3.5% too. You will have to pay mortgage insurance until you refinance or pay off the loan. But FHA loans offer more flexible underwriting to help offset credit challenges.
VA Loans
VA home loans don’t have a specific minimum credit score. But lenders usually want to see at least a 620. VA loans are for veterans, active duty military, and surviving spouses. No down payment is required. Closing costs can also be rolled into the loan amount. VA loans can be a great option for service members with less-than-perfect credit.
USDA Loans
Like VA loans, USDA home loans don’t publish minimum credit requirements. USDA loans are for low-to-moderate income buyers in designated rural areas. You can likely find a lender willing to approve a USDA loan with a credit score around 604. USDA loans offer 100% financing too.
Non-QM Loans
Non-qualified mortgages (Non-QM) are loans that don’t conform to standard government underwriting requirements. These loans are ideal for self-employed borrowers or those with unique financial circumstances. Non-QM lenders can use alternative credit data beyond just your FICO score. This added flexibility improves approval odds for applicants with scores as low as a 604.
Tips for Buying a House With a 604 Credit Score
While buying a home with lower credit takes more effort, it’s doable with the right strategy. Here are some tips for getting mortgage-ready with a 604 credit score:
-
Save for a larger down payment – Putting down 20% or more can offset credit risk and help you qualify. Lenders may require above-average down payments with lower scores too.
-
Reduce debt – Pay down credit cards and other debts to decrease your DTI ratio before applying. Too much existing debt can jeopardize approval odds.
-
Add a co-signer – Asking a family member with good credit to co-sign may improve your chances. Just know they’ll be equally responsible for the mortgage.
-
Improve credit first – Waiting to buy until you boost your score could unlock better loan terms. Pay bills on time and pay down balances to see a quick credit score lift.
-
Consider loan alternatives – Explore rent-to-own agreements, seller financing, or down payment assistance programs if you need more time to improve your credit.
How to Raise Your Credit Score
Bringing up your 604 credit score must be a priority before mortgage shopping. Even gaining just a few points can make a difference in the interest rate you’ll pay. Here are effective ways to increase your credit score:
-
Always pay bills on time – Payment history is the biggest factor in your score. Set up autopay or reminders to avoid late payments.
-
Pay down credit card balances – High balances hurt your credit utilization ratio. Pay down cards to below 30% of their limit. Pay in full each month.
-
Limit new credit applications – Too many new accounts can lower your score temporarily. Only apply for credit you need.
-
Correct errors on your credit reports – Errors can drag down your score. Dispute any inaccuracies with the credit bureaus.
-
Become an authorized user – Ask a family member with good credit to add you as an authorized user to help build your history.
-
Don’t close old accounts – Keep your oldest credit cards open as the length of credit history matters.
With diligence and smart credit habits, you can boost your score 100 points or more within 12 months. The higher your score, the better mortgage terms you can secure.
The Bottom Line
A credit score of 604 is considered fair. While buying a house with a 604 credit score is possible, you’ll face challenges like higher interest rates, larger down payments, and potentially tougher approval odds. Improving your credit before applying will open up better mortgage opportunities. Focus on paying bills on time, lowering balances, and limiting new credit to see your score start to rise. With planning and patience, homeownership can still be within reach even with less-than-ideal credit.
How a 600 credit score affects your mortgage rate
Do you find yourself asking, “Can I buy a house with a 600 credit score?” Well, the straightforward answer is yes. However, a credit score of 600 comes with certain financial implications, particularly when it comes to your mortgage rate.
Generally, the lower your credit score, the higher the interest rate you’ll likely face. This means higher monthly payments and a larger total amount paid in interest over the life of the loan.
When you aim to buy a house with a 600 credit score, your credit rating has a direct influence on your mortgage rate. This impact comes from what the industry calls “loan-level price adjustments” (LLPAs). These are risk-based fees that lenders usually add to the interest rate for borrowers with less-than-stellar credit scores or small down payments.
How do higher interest rates affect the cost of borrowing? Let’s look at how much interest you’ll pay over the life of the loan when borrowing $400,000 with a 30-year fixed-rate loan.
| Interest Rate | Mortgage Payment | Total Interest Paid |
| 6.75% | $2,594.39 | $533,981 |
| 7.0% | $2,661.20 | $558,036 |
| 7.25% | $2,728.71 | $582,334 |
| 7.5% | $2,796.86 | $606,869 |
Calculations are approximations and do not include property taxes, homeowners insurance, or other fees.
So, while buying a home with a 600 credit score is certainly possible, understand how a low credit score can influence the terms and overall expenses of your mortgage.
The best mortgage choice will vary by person, so it’s important to compare all your loan options before buying.
Importance of credit scores in home buying
Credit scores play an important role in the mortgage approval process and can significantly impact your interest rates. Here’s why they matter:
- Mortgage approval: Lenders use your credit score to assess the risk of lending to you. A higher credit score generally indicates lower risk, making it easier to qualify for a mortgage loan and potentially get preapproved.
- Mortgage interest rates: Your credit score directly affects the interest rates offered by mortgage lenders. A higher credit score typically results in lower interest rates, which can save you thousands of dollars over the life of the loan and may improve your chances for refinancing in the future.
- Loan types: Different types of mortgages have varying minimum credit score requirements. Your 600 credit score limits the types of loans available to you, potentially excluding you from a conventional mortgage.
While a 600 credit score is considered fair and may limit some options, it doesn’t necessarily preclude you from buying a house. Many borrowers with a 600 credit score can still qualify for FHA loans or other government-backed loan programs designed to help first-time home buyers and those with lower credit scores.
Can You Purchase a Home With a 600 Credit Score? – CreditGuide360.com
FAQ
Can I buy a house with a 604 credit score?
Is 604 a good credit score for a mortgage?
There isn’t a specific credit score that you need for a mortgage, but the higher your score the more likely your application will be accepted.
What can I do with a 604 credit score?
You’re unlikely to get approved for the best credit card offers, but you might be able to get a basic credit card or store credit card with your score. If you can’t qualify for a credit card (or one with decent benefits), you can apply for a secured credit card.
What is the lowest credit score to buy a house?
A good credit score to buy a home is one that helps you secure the best mortgage rate and loan conditions for the mortgage you’re applying for. You’ll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with a score as low as 500.